Howes: To boost tax haul in Detroit, change the reality

Here’s one thing to understand about the legal collision involving Mike Duggan and Quicken Loans Inc. Chairman Dan Gilbert, the mayor’s best friend in the business community:

City Hall wouldn’t be suing Gilbert’s real estate arm, Bedrock Management Services, for the personal information of its residential tenants if the city (and state law) didn’t give those folks a financial incentive to list permanent residences outside the city.

But policy drives practice — and behavior. That’s especially true in a city that until very recently did a dismal job collecting income and property taxes it was owed under existing law, partly because it did an equally poor job delivering services now steadily improving.

Sky-high auto insurance rates, an onerous burden Duggan has so far been unsuccessful in lightening, and a 2.4-percent city income tax rate double that paid by non-residents working in the city remain. Those are two economically rational reasons to play fast and loose with permanent residences.

Remove those incentives by overhauling Michigan’s no-fault insurance system and lowering the income tax paid by residents, and the problem diminishes. You also would eliminate two glaring reasons to stay put in the suburbs instead of making a play for lower-cost housing in one of the city’s more attractive neighborhoods.

Instead, the long arm of government is using the courts to bludgeon business, to force the likes of Gilbert’s Bedrock and others to cough up the names, addresses, employers and Social Security numbers of residents to ensure they filed resident income-tax returns because, well, it’s all about the money.

The city has a right to collect what it’s owed under existing law. Given its woeful collection efforts pre-Duggan and pre-bankruptcy, there’s every reason for it to improve those efforts with an assist from the state Treasury Department. But is using the courts to enforce an information dragnet the way to do it?

Detroit’s income-tax disparity is not the fault of developers renting or selling housing to residents. Nor is no-fault insurance that keeps Michigan auto insurance among the highest in the nation — yet another negative in perceptions the state is struggling to shake.

Here’s an idea: change those perceptions by changing reality. Duggan has proudly touted multiple rounds of reduced property assessments, and yet revenue keeps inching up. Harmonizing the resident rate to the lower non-resident rate would be a boon to longtime Detroiters even as it would encourage new arrivals to play by the rules.

Cutting rates doesn’t necessarily equate with cutting revenue, as the city’s experience with lowered property assessments demonstrates. Reducing the resident rate to the non-resident 1.2-percent rate could prove an added inducement to moving into the city, increasing its overall economic activity and breaking with its high-tax past.

In a statement this week, Gilbert said, “we do not believe we have the legal right or the contractual permission to release highly sensitive personal information of all our tenants” to any third party, including the government.

And if that information was collected without also notifying the residents it could be shared with government institutions, how could doing so be justified after the fact? If I lived in the city, I’d be very unhappy at the prospect of my landlord forking over my personal info just so the city could satisfy itself that I’m not a tax dodger.

Put another way: City Hall’s fishing expedition essentially assumes its residents guilty of tax evasion, and the only way to prove they aren’t is if yet another governmental institution is free to assemble and comb their private information. And of course it would be perfectly safe.

Says who? Data protection is one of the anxieties of our age. Credit card info and Social Security numbers, addresses and phone numbers, political campaigns and social media accounts are all susceptible to malign abuse by hackers a half a world away ... or just down the street.

And everyone seems to think they have a claim on it because, well, there is no privacy anymore. Easy to say if you’re not a tenant of one of the 50 properties in downtown and Midtown that’s part of the “low-hanging fruit” tax collection project operated by the city.

Unless and until existing tax rates are changed, the city is right to collect what its owed. But employing tactics reminiscent of Big Brother is not the way to do it — changing reality is.